Investor Presentaiton
FINANCING SUSTAINABLE TOURISM IN KHYBER PAKHTUNKHWA
This section provides a summary of KP taxation
departments and tourism management and
development authorities to give context and a
baseline to the discussion and analysis of ring-
fencing tax revenues for sustainable tourism.
Articles 118-124 of the Constitution of Pakistan
clearly states that all revenues received by the
provincial government will go into a
consolidated fund known as the Provincial
Consolidated Fund credited to the public
account of the province. The Provincial
Government has the power to authorize
expenditures from the fund and budgetary
allocations for various sectors are specified in
the Annual Budget. There are three
departments which directly control tax
collection in KP - The Khyber Pakhtunkhwa
Revenue Authority (KPRA), Revenue & Estate
Department and Excise and Taxation
Department.
5%
Reduced tax rate
for non-corporate hotels
KPRA, a corporate entity established under the
Khyber Pakhtunkhwa Finance Act, 2013, has
the mandate to administer and collect Sales
Tax on Services & Infrastructure Development
Cess. KPRA has emerged as the largest tax
collection authority of KP and collects a
substantial amount of tax from the hospitality
and tourism sectors as well. It has designed and
implemented a pro-tourism tax package
containing reduced tax rates (lowered tax rates
from 8% to 5% for non-corporate hotels) and
amnesty from penal liabilities for hospitality
sector businesses at the hill stations of Kaghan
Valley and Galliyat ensuring that all taxable
hospitality businesses in the area start
immediate adequate compliance and
continue to stay compliant in the future.
Moreover, the tourist areas of Chitral and Swat,
which fall under the Provincial Administered
Tribal Areas, PATA, enjoy a sales tax exemption
till 2023. The surge in domestic tourism and the
resultant increase in hospitality services such
as hotels and restaurants in the main tourist
areas has caused a significant increase in sales
tax revenue from the hospitality sector in the
last couple of years (see Table 1). However, the
revenue generated by KPRA goes into the
provincial pool and there is no constitutional
provision which would allow ring-fencing a part
of the revenue for expenditures in the area
from which the tax is collected.
CHITRAL & SWAT
Sales Tax exemption till 2023
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